Timothy Geithner served as the United States Secretary of the Treasury until January of this year. During his past four years in office Mr. Geithner has been an extremely polarizing figure in the financial world. His tenure was defined mostly by his dealings with the fallout of the recession. He is the name, perhaps unfairly, perhaps not, most associated with the Troubled Asset Relief Program (TARP). ((Sheelah Kolhatkar, Timothy Geithner and Why the Revolving Door Might be a Good Thing, Bloomberg Buisnessweek (Nov. 18, 2013), http://www.businessweek.com/articles/2013-11-18/timothy-geithner-and-why-the-revolving-door-might-be-a-good-thing.)) None of this is news to anyone, however, Warburg Pinkus, a private equity firm, made headlines early Saturday morning, November 16th when it announced that Mr. Geithner would be joining the company as president. ((Id.)) Much like Mr. Geithner’s term as Secretary of the Treasury, this news has also been polarizing throughout our country.
It took less than 24 hours after the announcement before people started emerging from the woodwork to criticize this move. ((Andrew Ross Sorkin, A Conflict in Geithner’s New Job? Not Exactly, Dealbook (Nov. 18, 2013, 9:07 PM), http://dealbook.nytimes.com/2013/11/18/hard-to-see-a-sellout-in-geithners-job-choice/.)) The people who most adamantly oppose this are people who believe that the government is just a “revolving door” for Wall Street types. These people fear that certain government officials come in from the private sector serve their term and return right back into the private sector when they finish. The reason that people are worked up about this is they believe this is leading to cronyism and favoritism towards Wall Street in Washington. ((See id.)) These people are also afraid that this type of “revolving door” will further erode the faith that the general public has in its elected officials. ((See id.)) If these government officials are heading off when they are finished to work in the private sector, the logic goes, what is stopping them while in office from taking steps to aid themselves in their next career platform?
Those who oppose Geithner’s move fear the prospect of getting a lucrative private sector position after they leave office will cause our highest officials to give further access to Wall Street and not make the tough decisions they may need to. ((See id.)) What has tended to hurt some about Geithner in particular is many people saw him as a true public servant who was isolated from all of the Wall Street interests. ((Joshua Green, Why People are Mad at Tim Geithner for Jumping into Private Equity, Bloomberg Buisnessweek (Nov. 18, 2013), http://www.businessweek.com/articles/2013-11-18/heres-why-people-are-mad-at-tim-geithner-for-jumping-into-private-equity.)) Now that Mr. Geithner has become the president of Warburg Pinkus, in the eyes of those who fear Wall Street corruption of our government, he is part of the problem. These people now voice concern that Mr. Geithner, while acting as Secretary of the Treasury, was advancing his own interests and those of Wall Street, rather than those of the American people.
On the other side, many people are scoffing at the notion that Geithner, having the plan to head into private equity all along, was not as hard on Wall Street during his tenure as he should have been. Geithner was actually pushing for closing of the carried interest tax loophole that allowed private equity firms and hedge funds to pay much lower taxes on their earnings. ((See Kolhatkar supra n.1.)) This move to the private sector should not open the floor to everyone to question Geithner’s motives when in office. It is also important to note that Geithner took a position at a strong Private Equity firm but not necessarily one of the biggest. Warburg Pinkus was not one of the major firms that Geithner has been dealing with when he was in office. Another whole conversation would have to be had if he had joined Goldman Sachs or Citigroup, who benefitted from the bailout, or Blackrock who is one of the biggest buyers of United States Treasuries. ((See Sorkin supra n. 3.))
While there are many people who fear the so-called revolving door, there are also plenty of people who believe that it is actually a great idea for our government. By showing that these public servants can secure great jobs upon leaving; we can attract the best and brightest minds into public service. ((See Kolhatkar supra n.1.)) This would allow people who have first-hand knowledge of how our economy functions to come in, knowing they have an exit option when they leave, serve our country to the best of their abilities and exit back into their field of choice.
The Geithner situation is just a microcosm of the bigger fight that is raging currently. People distrust the way that our financial institutions interact with our government. This was most prevalently shown just a few short years ago in Zuccotti Park. When these activists see senior government officials heading into the private sector after their term they begin to question everything about that person’s record. The distrust grows, and while it is unwarranted, there is nothing short of putting a ban on this transition, which is not a good idea whatsoever, that could prevent this. In short there will always be people who fear the worst when it comes to our government, however when looked at objectively we must continue to try to attract the best and brightest that we have into public service. One very important way to do this is to allow any and all exit opportunities to exist.
Latest posts by Andrew Tremble (see all)
- WhatsApp Shows What’s Possible for Venture Capital Investors - February 28, 2014
- Aeropostale’s PIPE Dream - February 17, 2014
- Buy or Sell: Geithner’s New Gig - November 25, 2013